Environmental regulations and redistribution of polluting industries in transitional China: Understanding regional and industrial differences

Abstract

This paper examines the diverse patterns and driving forces of the changing distribution of pollution-intensive industries (PIIs) in the Yangtze River Delta (YRD), China from 1999 to 2015. The results find the co-existence of the Pollution Haven Hypothesis (PHH) and the Porter Hypothesis (PH) at an industrial level. PIIs, especially the labor-intensive PIIs, become geographically more dispersed to the peripheral YRD, while capital-, tax- and technology-intensive PIIs are still highly concentrated in the core YRD. Uneven environmental regulations (ERs), such as pollutant emission controls and government supervision, have directly reshaped the spatial patterns of PIIs. The modelling results also suggest that regional differences in factor endowment, ecosystem, and upgrading and innovation milieu play an important role in PIIs (re)distribution, and PIIs with diverse industrial characteristics respond differently to the changes in ERs and other place-specific attributes. Relatively loose ERs, low production cost, and high environmental bearing-capacity can promote the formation of “pollution havens” for labor-intensive or low-end PIIs. However, local assets such as innovation milieu may heighten the effects of the PH on capital-intensive or high-tech PIIs. This study provides China's evidences about the co-existence of the PHH and the PH, and can advance our understanding of the restructuring process and mechanism of PIIs at finer geographical scales.